Hospitality and Leisure Group

Industry update Good news sandwich “The best of times and worst of times.” “The more things change, the more things stay the same.” “Who moved my cheese?” These are well worn expressions which can easily be applied to the Hotel Industry. Issues such as the Asian tsunami tragedy (now almost mirrored in the US by Hurricane Katrina and Hurricane Rita) summer bombings in London, sadly, as we write, more bombings in Bali, escalating fuel and energy costs ... , the emergence of low-cost airlines and new hotel brands which collectively or independently force the industry to react. As expected, Hoteliers respond fast with courage, boldness, creativity and flexibility. The industry also shows its ability to be resilient, to endure and to persevere. Asian excitements On a more positive note, there are many Asian excitements to come. Greater China is having a bonanza time for large scale tourism events. The Mainland of China is aggressively preparing for the Olympic Games in 2008 and finalising Olympic related construction in 2006. The impacts of WTO, CEPA and more free independent travellers add extra excitement to the hotel sector both within China and outside China. Hong Kong is launching its Discover Hong Kong

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Year 2006. Hong Kong’s Disneyland has just opened, Asia-World Expo opens its doors at the end of 2005/early 2006 and the new Tung Chung Cable Car will open in early 2006. The new Landmark Mandarin Oriental set new standards of luxury in Central when it opened in August 2005. This was followed shortly afterwards by the opening in September 2005 of the new majestic Four Seasons Hotel and Four Seasons Place (an all-suite hotel) creating further landmarks for Hong Kong’s dynamic waterfront. The new Langham Place has also created a massive tour de force with its impressive new hotel, office and retail complex in Mongkok. The Langham Group can add “urban renewal” to its mission statement. Many other hotels have recently opened or shortly will open increasing Hong Kong’s hotel room supply from 39,000 to 53,000 in just a few years. Sounds exciting? Certainly. Macau, however, may top Hong Kong over the next 2-4 years in the race for the creation of supersized hotel and casino resorts and more exhibition centre business. The work force in Macau allegedly will need to grow by an additional 100,000-125,000 workers over the next 3-4 years. This will lead to an increase in Macau’s population by 20-25%. Watch out for potential inflation, staff shortages and staff training issues. Exciting? Certainly. An Asian casino boom seems destined to follow as Singapore short-lists its candidates for two mega hotel-casino projects. Thailand and Vietnam are reportedly re-considering changes in legislation to permit and regulate this new cash-cow contributing industry. Rumours abound that even Hong Kong may give this a second thought. In the Mainland of China, the casino boom is replaced with large-size mixed use developments appearing in primary, secondary and tertiary cities in large supply. The scale and number of developments will no doubt have an impact on an Owner’s negotiation leverage with Hotel Operators and ultimately (in certain locations) on their financial feasibility as fears of over-supply may re-appear. We are just beginning to hear news of hotels in Mainland China with debt restructuring potential. Meanwhile in Thailand, Vietnam, Macau, the Mainland of China (and even perhaps Hong Kong), we are now watching the creation of condo-hotels, time-share developments and hybrids of the two. An Asian hotel REIT seems a long way off but is at least perhaps "within sight" in a way that it never has been before. JSM's response - New developments in JSM's Hospitality and Leisure Group In meeting these “best of times”, JSM’s Hospitality & Leisure Group has expanded with 3 more partners becoming actively involved in our Hospitality & Leisure practice (Rosaline Cheung and Ellen Tsao in our Hong Kong office and John Marsden who is now relocating to our 2

Shanghai office). On 1 September 2005 we also opened our Phuket office to supplement the activities of our Bangkok office. This year alone JSM’s Hospitality and Leisure Group has received instructions to act on over 20 hotel projects in Greater China. This excludes hotel related activities conducted by our offices in Thailand and Vietnam. These projects cover the full life cycle of work from land acquisition, debt restructuring and joint venture work, construction, financing, IP, hotel management agreements, disputes, insolvency and the buying and selling of hotels and serviced apartments. We are particularly excited in seeing new time-share/condo hotel projects coming to life having acted on the fist of such developments in Vietnam with a few others “under-negotiation” due to appear in places near you soon! We continue to be “at your service” in “opening doors and closing deals in Asia”. Andrew MacGeoch Hospitality and Leisure Group 4 October 2005

AsiaWorld-Expo will be Hong Kong's biggest and newest exhibition and event venue. Located adjacent to the Hong Kong International Airport, AsiaWorld-Expo is due to open in late 2005

 AsiaWorld-Expo

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Our Experience Set out below are some of the types of work undertaken by JSM’s Hospitality and Leisure Group. This list is by no means exhaustive, but gives a flavour of the role JSM has played in this market. 1.

Real estate, development and management issues

The commercial and real estate lawyers in our Hospitality and Leisure Group have had a very active time serving the industry. Examples of recent work include:

 Sun Hung Kai Properties Limited

 Macau Government Tourist Office

 AsiaWorld-Expo

Ritz-Carlton and " W" hotel projects in Hong Kong and Shanghai advising Sun Hung Kai Properties on the appointment of Ritz-Carlton and Starwood Group for developing Ritz-Carlton and "W" brand hotels respectively in Hong Kong and Shanghai Joint venture in Macau advising Hongkong Land on its joint venture with Shun Tak to develop a 2.6 million sq. ft mixed use development including retail, serviced apartments, residential and a hotel to be managed by Mandarin Oriental

 Mandarin Oriental

The Landmark Mandarin Oriental advising Hongkong Land on hotel management agreements for its boutique 113-room hotel opened in August 2005

Hotel Group

 Swire Properties Ltd

Development in Guangzhou advising Swire Properties on all aspects of its joint venture with Guangzhou Daily News to develop a 4 million sq. ft mixed use development to include 2 hotels, retail, offices and cultural facilities

AsiaWorld-Expo drafting and negotiating documentation for tendering, selection and appointment of a developer and operator for this international exhibition centre

Le Méridien Cyberport advised and negotiated management agreements on behalf of the HKSAR Government

Theme park in Hong Kong advising on construction, development and operational matters

Sheraton Krabi Beach Resort advised owners and negotiated management agreements on their behalf

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 Furama Resort Danang, Vietnam

Hotel and mixed use projects in Mainland China advising owners on land acquisition, joint ventures and management contracts for hotels and mixed use developments in Mainland China

Serviced suites and apartments in Hong Kong, Mainland China, Thailand and Vietnam advising owners on development, management and regulatory matters

Hotel projects in Vietnam advising owners and luxury brand operators on land acquisition, joint ventures and management agreements for hotel resort projects in Vietnam

Gaming and casino projects advising on gaming legislation, land acquisition and development issues, joint venture, management and other related issues for gaming & casino projects in Macau, Vietnam and Thailand

Timeshare projects and strata sale of hotel rooms and villas in Hong Kong, Thailand and Vietnam advising owners on land acquisition, development, ownership structuring, management and sales

Sale of hotels advising owners and lenders on sales of hotels in Hong Kong, Mainland China, Thailand and Vietnam

"Real Estate Law Firm of the Year" Asian Legal Business Awards 2002, 2003, 2004 and 2005

 Indochina Land Holdings The Nam Hai, Vietnam is a 5-star resort and villa complex developed for high-end tourists. Located on Vietnam's famous China Beach, The Nam Hai is scheduled to open in the first quarter of 2006

"Insolvency Law Firm of the Year" Asian Legal Business Awards 2002 and 2003

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Town planning and planning regulatory issues •

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• •  Regent International Hotels Regent Ningbo will be the centerpiece of major redevelopment of the Ningbo Economic and Technical Development Zone, Mainland China. This 325-room hotel is due to open in 2006

Hotel concessions under the Buildings Ordinance and the Building (Planning) Regulations in Hong Kong Hotel accommodation tax and licensing issues under the Hotel and Guesthouse Accommodation Ordinance in Hong Kong Satellite television licensing issues for hotels in Hong Kong Owner and operator liabilities arising out of SARS type situations

Hotel management agreements Advising owners and hotel-operators in negotiating management agreements in respect of the following brands: • • • • • • • • • • • • • • • • • •

Four Seasons Ritz-Carlton Marriott Conrad Raffles Langham Hyatt St. Regis “W” Westin Sheraton Regent Shangri-La Mandarin Oriental Le Méridien Furama Alila Group GHM

for hotels and resorts in Hong Kong, Macau, Mainland China, Thailand and Vietnam

 Sun Hung Kai Properties Limited Four Seasons Hotel and Four Seasons Place are six-star world class luxury hotels with 400 rooms and 536 suites respectively. Opened in September 2005, the two hotel towers are the largest hotel facilities in Hong Kong

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2.

Finance

Members of JSM's Hospitality and Leisure Group regularly advise banks/syndicates in financing investors in the acquisition of hotels, resorts and pleasure and luxury cruise ships and in financing owners of such assets for working capital purposes.  JW Marriott Hotel Hong Kong

We also advise on corporate restructuring, insolvency matters, debt restructuring and the re-possession of hotels.

JW Marriott Hotel is a luxurious hotel with over 600 rooms and suites located in the heart of the central business district in Hong Kong

Re-financing of existing loans for hotels in Hong Kong Recent examples include: • • • • • • •

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Conrad, Marriott and Island Shangri-La at Pacific Place Regal Group of hotels in Hong Kong Great Eagle Hotel Nikko Hotel Hyatt Regency Shangri-La Kowloon Caravelle Hotel in Vietnam

Financing the acquisition of hotels Recent examples include: • • •

Park Hotel former News Agency building in Hong Kong financing the acquisition of a real property which will be developed as a high-rise five stars hotel with a casino

Construction

The Hospitality and Leisure Group advises on, drafts and negotiates the full range of construction documents for developers, owners and contractors. Recent examples include:

Drafting and negotiation of construction documentation • • •

AsiaWorld-Expo at the Hong Kong International Airport Theme park in Hong Kong Cyberport, Hong Kong

Construction advice • • •

Casino/hotel projects for Galaxy, Macau Furama Resort, Danang The Westin Resort, Macau

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Cyberport Hong Kong

 Hong Kong Cyberport Management Co. Ltd.

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Dispute resolution

JSM's Hospitality and Leisure Group handles a range of dispute resolution processes for construction related disputes and disputes arising out of the operation of hotels. Whilst specific details of the following examples must be kept confidential, we have advised on: Rent review arbitration for a luxury hotel in Hong Kong

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Rating and valuation disputes and appeals for a number of hotels in Hong Kong

Construction dispute resolution • a luxury hotel in Thailand • a resort in Vietnam • a number of hotels in Hong Kong

Insurance claims advising hotels, restaurants and insurers on business interruption and third party liability claims

Other services

The Group also advises on other industry related matters including:

 intellectual property registration, enforcement and licensing matters

employment matters, pension and MPF schemes

insurance matters for hotels and leisure related businesses

establishment of private equity funds investing in real estate, infrastructure and hotel sector projects

securitisation of hotel revenue streams

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Members of the Hospitality and Leisure Group JSM’s Hospitality and Leisure Group is the largest in Asia consisting of 30 partners (each supported by their respective assistant solicitors). The Group has acted on over 500 hotel matters in the region over the last 10 years or so. Our experienced practitioners represent owners, developers, operators, financiers and other prominent participants in the hotel and leisure industry. We assist the industry in providing advice on a full spectrum of issues which can arise during the development, construction, pre-opening preparation and post-opening operation of hotel and resort projects. The Group has concluded hotel and leisure acquisitions, sales, development and management contracts, resolved disputes, closed financings and refinancings of hotels and resorts located in Hong Kong, Macau, other parts of Mainland China, Thailand and Vietnam. Members of the Group are also regular writers and speakers on hotel and leisure related topics.

About Johnson Stokes & Master Johnson Stokes & Master is the largest law firm in Hong Kong and a leading commercial law practice in Asia. Founded in Hong Kong in 1863, we are a full-service commercial law practice with over 230 lawyers based in our offices in Hong Kong, Beijing, Shanghai, Bangkok, Awarded by IFLR 2000/2001/2002/2003/2004 at Asian Legal Business Awards 2002/2003/2004/2005 China Law Awards 2003/2004 and Asian Law Awards 2000/2001

Phuket (a new office opened on 1 September 2005), Hanoi and Ho Chi Minh City. Perhaps more important than this is our culture. A clear focus on our clients' goals and concerns has driven our success. Combined with an excellent technology system, we provide high quality legal advice and client care in a timely, efficient and cost effective manner.

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Contact us If you would like further information about Johnson Stokes & Master’s Hospitality and Leisure legal services, please contact the following lead partners: Hong Kong Andrew MacGeoch Direct tel: (852) 2843 2253 Email: [email protected]

Rosaline Cheung Direct tel: (852) 2843 2340 Email: [email protected] Ellen Tsao Direct tel: (852) 2843 4289 Email: [email protected]

Mainland China Terence Tung Tel: (86 10) 6505 2202 (Beijing) Email: [email protected] Ian Lewis Tel: (86 10) 6505 2202 (Beijing) Email: [email protected] Billy Ho Tel: (86 21) 6288 0688 (Shanghai) Email: [email protected]

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Andy Yeo Tel: (86 21) 6288 0688 (Shanghai) Email: [email protected] John Marsden Tel: (86 21) 6288 0688 (Shanghai) Email: [email protected]

Thailand Anurag Ramanat Direct tel: (66 2) 638 0790 Email: [email protected] Peter Burke Direct tel: (66 2) 638 0877 Email: [email protected] Araya Akomsoonthorn Direct tel: (66 2) 638 0876 Email: [email protected]

Vietnam Dao Nguyen Tel: (84 8) 822 8860 (Ho Chi Minh City) Email: [email protected] Hoang Anh Nguyen Tel: (84 4) 824 4316 (Hanoi) Email: [email protected]

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Location of JSM offices Hong Kong Office

16th-19th Floors, Prince’s Building 10 Chater Road Central Hong Kong

Tel: (852) 2843 2211 Fax: (852) 2845 9121 Email: [email protected]

Beijing Office Suite 2918 - 2924, China World Tower 1 No. 1 Jian Guo Men Wai Avenue Beijing 100004 People’s Republic of China

Tel: (86 10) 6505 2202 Fax: (86 10) 6505 2225 Email: [email protected]

Shanghai Office Suite 2501-2504, Plaza 66 No. 1266 Nan Jing Road West Shanghai 200040 People’s Republic of China

Tel: (86 21) 6288 0688 Fax: (86 21) 6288 0131/2 Email: [email protected]

Thailand Office – Bangkok 12th Floor, TISCO Tower 48/20 North Sathorn Road Bangrak Bangkok 10500 Thailand

Tel: (66 2) 638 0880 Fax: (66 2) 638 0870 Email: [email protected]

Thailand Office – Phuket 12/9 Moo 4, Thepkrassatri Road Tumbon Kohkaew Amphur Muang Phuket 83000 Thailand

Tel : (66 0) 7625 5350- 52 Fax: (66 0) 7623 9969 Email: [email protected]

Vietnam Office – Hanoi 3rd Floor, 27 Ly Thai To Street Hoan Kiem District Hanoi Vietnam

Tel: (84 4) 824 4316/7/8 Fax: (84 4) 824 4319 Email: [email protected]

Vietnam Office – Ho Chi Minh City 6th Floor, Saigon Tower 29 Le Duan Street, District 1 Ho Chi Minh City Vietnam

Tel: (84 8) 822 8860 Fax: (84 8) 822 8864 E-mail: [email protected]

www.jsm.com Special thanks to Alila Hotels and Resorts for providing the cover photo from Alila Manggis Bali. All rights reserved. 10/2005

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